Edward Jones: Confronting Success in 2006

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Founded in 1922 in St. Louis by Edward Jones, Sr., Edward Jones (Edward Jones Financial Companies, LLC) is today the nation’s fourth-largest brokerage with 8.1 million retail accounts and retail client assets of $369 billion as of the end of 2005 (Collie & Smith, 2008, p. 18). At the end of 2005, Edward Jones had 9,733 brokers working in 8,581 domestic and 660 foreign (Canada and the UK) offices (Collie & Smith, 2008, p. 18). Edward Jones falls into the category of a full-service brokerage (offering a variety of financial services products and direct, personalized assistance from a Financial Advisor) and it competes against other traditional full service brokerages as well as against discount brokerages, online brokers, banks, insurance companies, financial planners, and mutual funds.

Under the direction of Edward Jones, Jr., the company Edward Jones made its initial expansion starting in the 1950s and 1960s into rural areas and small suburbs where there was little or no competition. Edward Jones began to pursue a more ambitious expansion plan in the 1970s and 1980s, following a plan and strategy set out by Financial Advisor and partner John Bachman. Bachman served as managing partner of the firm from 1980 to 2004, steering the firm, with the help of consultant Peter Drunker, on an aggressive expansion (including expansion into metropolitan areas beginning in 1981), while still heeding to the firm’s original strategic principles. A central tenant of the strategy is the belief that the “end customer was the only client of the firm...every client was to be treated equally and afforded the same high ethical standards and access to services” (Collie & Smith, 2008, p. 5). Other key principles in Edward Jones strategy stressed the power of individual entrepreneurs in offices with just one financial advisor and one branch office assistant, the notion of employees as owners, the stress on the personal relationship with the client, and training and promotion from within the firm (Duffy, 2002). Edward Jones had historically eschewed reliance on client-computer interfaces (e.g., no online trading, no email communications, etc.), although in recent years there was a greater reliance on computers, including an existing $100 million project to convert from satellite to Internet-based terrestrial network. Edward Jones stressed a fairly conservative investment approach, urging clients to stay in for the long-term and to focus on quality, blue-chip stocks.

The brokerage industry has undergone enormous changes over the past three decades as a result of major transformations in the operating environment. Globalization of finances, deregulation, the evolution of new technologies including the Internet, economic changes, demographic shifts, and other factors had all impacted the industry. New competitors and new categories of competitors had emerged in response to these changes.

John Bachman ceded his role as managing partner to Doug Hill in 2004. Hill resigned in late 2005 after regulators fined Edward Jones $300,000 and charged it with involvement in a “revenue sharing” program (Hume, 2005, p. 1). Jim Weddle took over as managing partner of Edward Jones in January of 2006 and set out to see how the firm could sustain its performance and achieve its goal of expanding to 20,000 financial advisors by 2017. The following provides an analysis and potential case solution to this Harvard Business School case study on Edward Jones looking forward from 2006.

While the strategy that Edward Jones has followed for the past thirty years has served it well, this strategy may now be out of step with the demands of the rapidly changing operating environment and Edward Jones’ goal of maintaining its historical high performance record and grow to 20,000 financial advisors by 2017. Weddle must determine whether the strategy, or perhaps...
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